C STUDENT DEBT 2

[Pages:32]13TH ANNUAL REPORT | SEPTEMBER 2018

STUDENT DEBT AND THE CLASS OF 2017

THE INSTITUTE FOR COLLEGE ACCESS & SUCCESS | page

acknowledgements

The Institute for College Access & Success (TICAS) is an independent, nonprofit, nonpartisan organization working to make higher education more available and affordable for people of all backgrounds. Our Project on Student Debt increases public understanding of student debt and the implications for our families, economy, and society. To learn more about TICAS, visit and follow us on Twitter at @TICAS_org. Student Debt and the Class of 2017, our thirteenth annual report on debt at graduation, was researched and written by TICAS' Diane Cheng and Veronica Gonzalez. Special thanks to the entire TICAS staff, virtually all of whom contributed to the report's development and release. All of the college- and state-level debt data used for the report are available online at posd/map-state-data. The data are also available with additional information on more than 12,000 U.S. colleges at College-, TICAS' higher education data site. We are grateful to our foundation partners and individual donors whose support makes TICAS' work possible. Current foundation funding for our Project on Student Debt and other national research and policy work comes from the Bill & Melinda Gates Foundation, Rosalinde and Arthur Gilbert Foundation, the Joyce Foundation, Kresge Foundation, and Lumina Foundation. The views expressed in this paper are solely those of TICAS and do not necessarily reflect the views of our funders. This report can be reproduced, with attribution, within the terms of this Creative Commons license: licenses/by-nc-nd/3.0/.

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Table of Contents: Student debt and the class of 2017

Overview and Key Findings

1

About This Report and the Data We Used

2

National Trends: Recent Slowdown in Student Debt Growth

for College Graduates

3

Figure 1: Average Debt of Graduating Seniors Who Borrowed

3

How Successfully are Bachelor's Degree Recipients Repaying their Loans? 5

student debt at colleges

6

Student Debt at For-Profit Colleges

7

student debt by state

8

Table 1: High-Debt States

8

Table 2: Low-Debt States

8

Table 3: Percentage of Graduates with Debt and Average Debt of Those

9

with Loans, by State

Data on Debt at Graduation

11

Table 4: Comparison of Available Annual Data on Debt at Graduation

11

Private (NONFEDERAL) LOANS

12

Figure 2: Private Loan Borrowers by Federal Loan Usage

12

What Colleges and States Can Do

14

Institutional Policy Ideas for Reducing Debt Burdens

14

State Policy Ideas for Reducing Debt Burdens

15

federal Policy Recommendations to Reduce the Burden of

17

Student Debt methodology: where the numbers come from and how we use

22

them

THE INSTITUTE FOR COLLEGE ACCESS & SUCCESS | page

overview and Key Findings

Student Debt and the Class of 2017 is TICAS' thirteenth annual report on the student loan debt of recent graduates from four-year colleges, documenting the changes in student loan debt and variation among states as well as colleges. Unless otherwise noted, the figures in this report are only for public and nonprofit colleges because virtually no for-profit colleges report what their graduates owe.

Nationally, about two in three (65 percent) college seniors who graduated from public and private nonprofit colleges in 2017 had student loan debt, a slight decrease from 2016. These borrowers owed an average of $28,650, which is only 1 percent higher than the 2016 average of $28,350.

Nationally, about two in three graduating seniors had student loans. Their average debt was $28,650, only 1% higher than the Class of 2016.

State averages for debt at graduation ranged from a low of $18,850 (Utah) to a high of $38,500 (Connecticut), and new graduates' likelihood of having debt ranged from 38 percent (Utah) to 74 percent (New Hampshire). In 18 states, average debt was more than $30,000. Many of the same states appear at the high and low ends of the spectrum as in previous years. High-debt states remain concentrated in the Northeast and low-debt states are mainly in the West. See page 9 for a complete state-by-state table. At the college level, average debt at graduation covers an enormous range, from $4,400 to $58,000.

About 15 percent of the Class of 2017's debt nationally was comprised of nonfederal loans, which provide fewer consumer protections and repayment options than federal student loans, and are typically more costly. While there is broad consensus that students should exhaust federal loan eligibility before turning to other types of loans, recent federal data show that more than half of undergraduates who take out private loans have not used the maximum available in federal student loans.

The slower growth in student debt for recent college graduates is encouraging news. Increases in state spending and grant aid are both likely contributing factors, showing the value of investments in higher education. However, more research is needed to better understand what role these and other factors have played, as well as whether they are likely to continue.

Moreover, many students continue to face challenges with debt burden and college affordability. After considering grants and scholarships, undergraduates at four-year colleges still had almost $11,000 of unmet need, with $6,600 still left uncovered after taking all loans into account. While bachelor's degree recipients are typically better positioned than other students to repay their loans, certain groups of graduates still struggle with their debt. For example, graduates from lower income families are five times as likely to default on their loans as their higher income peers, and 21 percent of Black college graduates defaulted within 12 years of entering college. There remains an urgent need for federal and state policymakers to address the challenges of affordability and burdensome debt for all college students.

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About this Report and the Data We Used

Colleges are not required to report debt levels for their graduates, and the available collegelevel federal data do not provide the typical debt for bachelor's degrees or include private loans. To estimate state averages, we used the most recent available figures, which were provided voluntarily by half of all public and nonprofit bachelor's degree-granting four-year colleges.1 The limitations of relying on voluntarily reported data underscore the need for federal collection of cumulative student debt data for all schools. For more about currently available debt data, see page 11. This report includes federal policy recommendations to reduce debt burdens, including the collection of more comprehensive college-level data. Other recommendations focus on reducing the need to borrow, keeping loan payments manageable, improving consumer information, strengthening college accountability, and protecting private loan borrowers. For more about these federal policy recommendations, see page 17. To learn more about what states and colleges can do, see page 14. A companion interactive map with details for all 50 states, the District of Columbia, and more than 1,000 public and nonprofit four-year colleges is available at posd/map-state-data.

THE INSTITUTE FOR COLLEGE ACCESS & SUCCESS | page 2

National Trends: Recent Slowdown in Student Debt Growth for College Graduates

College-reported data show that, nationally, the average debt for bachelor's degree recipients at public and private nonprofit colleges in 2017 was only 1 percent higher than the 2016 average. Federal data covering all college types also show a slowdown in the growth of student debt for recent graduates. While this report is focused primarily on 2017 graduates and the data available for those students, the best available data source for student debt trends is a nationally representative study conducted by the federal government every four years. (For more on debt data sources, see the Methodology section.) Between 1996 and 2012, federal data on bachelor's degree recipients show that the average debt of borrowers increased steadily, at an average of 4 percent per year.2 Between 2012 and 2016, that growth stopped.

figure 1 Average Debt of Graduating Seniors who Borrowed (Current dollars, all 4-year colleges)

This overall trend for bachelor's degree recipients masks significant variation in debt burden for different types of students. Further exploration is needed to determine which factors contributed to this slowdown, which factors mattered for whom, and how those factors might interact with each other. Nevertheless, several recent trends in higher education offer helpful context for beginning to understand the slowdown in borrowing among recent graduates. For example, changes in college costs and net prices may have reduced some students' need to borrow. At public and nonprofit four-year colleges, while sticker prices continued to grow between 2011-12 and 2015-16, they grew at a much slower pace than in prior years.3 State spending on higher education partially rebounded from Great Recession lows, increasing by 23 percent, on average, between 2012 and 2016.4 These funding increases likely helped slow tuition increases at public colleges during this time, though state investment in higher education remains below pre-recession levels.5 Growth in the net price of public and nonprofit four-year colleges ? what students and families must pay after accounting for grants and scholarships ? grew more slowly than sticker prices.6 Increases in grant aid helped to keep students' costs down even while published college prices grew. Federal data show that undergraduates who attended public and nonprofit four-year colleges in 2015-16 were more likely to receive institutional grants than students in 2011-12 (38

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percent vs. 31 percent), and received $1,000 more on average.7 At private nonprofit colleges, more institutional funds were spent on financial aid, softening the impact of rising sticker prices. For every $100 in gross tuition and fees revenue they received, private nonprofit colleges were spending $4 more on financial aid in the form of grants, scholarships, and fellowships in 2015-16 than they were in 2011-12.8 Modest yet steady investments in the federal Pell Grant during this period also helped the grant keep pace with inflation and prevented an even more significant erosion of purchasing power; however, in 2015-16, the maximum grant still only covered 30 percent of college costs.9

Additionally, there were other borrowing trends during this time period that are worth consideration. The data in this report do not include loan amounts that parents have borrowed to help their children pay for college, but federal data show notable changes in parent borrowing for bachelor's degree recipients. Overall, the average parent loan increased between 2012 and 2016, though the share of parents borrowing loans decreased.10 Similarly, federal data show that the average private loan increased, while the share of graduates with private loan debt declined.11 Some have suggested that the growth in parent debt relates to students hitting their federal loan limits,12 yet it is hard to know with available data how much of a factor this is. It is also possible that federal loan limits played a role in the increase in institutional grant aid spending discussed above, as colleges sought ways to support students in lieu of turning to additional loans. More analysis is needed to understand each of these trends, their causes, who is affected, and how they relate to student debt burdens.

The slowdown in the growth of student debt for recent bachelor's degree recipients is a welcome trend, but it does not mean that the burden of student debt is less of a concern, or that students' struggles to afford college are not still serious and persistent. After considering grants and scholarships, undergraduates at four-year colleges still had almost $11,000 of unmet need in 2015-16, with $6,600 still left uncovered after taking all loans into account.13

The recent slowdown in the growth of student debt is a welcome trend, but it does not mean that the burden of student debt is less of a concern, or that students' struggles to afford college are not still serious and persistent.

As discussed on page 5, bachelor's degree recipients are typically better positioned than other students to repay their loans, but certain groups of bachelor's degree recipients still struggle with their debt. Looking at all students, there are a record high 8.9 million federal loan borrowers currently in default, and more than 1 million borrowers defaulting every year.14 Nearly a quarter (23 percent) of federal Direct Loan borrowers are over 30 days delinquent or in default.15

More must be done to ensure that the burden of student loan debt is manageable, and that it is not borne disproportionately by vulnerable groups of students. For example, more than eight in 10 Pell Grant recipients who graduated with a bachelor's degree in 2016 had student debt, and their average debt was $4,500 more than their higher income peers.16

Additional investments from states and the federal government, well-targeted to students with financial need, remain an important priority for reducing students' need to borrow. For example, it is crucial to restore the now-expired automatic inflation adjustment and substantially increase federal investment in the Pell Grant. For more on how to reduce student debt burdens, see our federal policy recommendations beginning on page 17.

THE INSTITUTE FOR COLLEGE ACCESS & SUCCESS | page 4

How Successfully are Bachelor's Degree Recipients Repaying their Loans?

This report focuses on debt loads of students who earned a bachelor's degree, allowing for apples-to-apples comparisons of the amount of debt needed across states and colleges to obtain a similar credential. However, these students are typically better positioned than others to repay their debt, as a bachelor's degree holds labor market value that helps facilitate student loan repayment.* Nationally, only 5 percent of bachelor's degree recipients who entered college in 2003-04 had defaulted on their federal student loans within 12 years of entering college, compared to 12 percent of associate's degree recipients, 29 percent of certificate completers, and 23 percent of noncompleters.** While student loans prove to be a good investment for most college graduates, certain groups of bachelor's degree recipients still struggle with their debt. Bachelor's degree recipients who were Black, who received Pell Grants, who were the first in their family to attend college, and who attended for-profit colleges were more likely to default on their loans. ? More than one in five (21 percent) Black bachelor's degree recipients defaulted within 12 years of entering

college, a much higher rate than their white (3 percent) and Hispanic or Latino (8 percent) peers. ? Bachelor's degree recipients who received Pell Grants, most of whom had family incomes of $40,000 or

less, were more than five times as likely to default within 12 years as their higher income peers (11 percent versus 2 percent). ? First-generation bachelor's degree recipients were more than twice as likely to default than students whose parents had attended college (10 percent versus 4 percent). ? Three in 10 (30 percent) bachelor's degree recipients who started at for-profit colleges defaulted on their federal student loans within 12 years of entering college, seven times the rate of those who started at public colleges (4 percent) and six times the rate of those who started at nonprofit colleges (5 percent).***

* For example, young adults with only a high school diploma are almost three times as likely to be unemployed, and earn three-fifths as much, as those with at least a bachelor's degree. Calculations by TICAS on 2016 income data from the U.S. Census Bureau, Current Population Survey, 2017 Annual Social and Economic Supplement, Table PINC-04; and unpublished data from the Bureau of Labor Statistics, Current Population Survey, 2017 annual average for unemployment rates. Young adults are defined as persons aged 25 to 34. ** All figures in this section are calculations by TICAS on data from the U.S. Department of Education's Beginning Postsecondary Students Longitudinal Study (BPS), which follows undergraduate students who enrolled in college for the first time in 2003-04 and tracks whether they defaulted on their federal student loans within 12 years of entering college. This analysis looks at the default rates for all entering students, not just borrowers, which reflect both students' varying likelihood of borrowing loans as well as borrowers' likelihood of defaulting. For more information about students' repayment struggles by completion status, see TICAS. 2018. Students at Greatest Risk of Loan Default. . *** These differences are statistically significant, though the for-profit college student estimate has high relative standard errors due to small sample sizes.

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